Wake-up call for garments industry

FE Team | Published: October 04, 2007 00:00:00 | Updated: February 01, 2018 00:00:00

Shahiduzzaman Khan
There has been sharp fall in the readymade garments (RMG) export orders from the United States (US) and the European Union (EU), the largest apparel buyers from Bangladesh in recent times. The withdrawal of all restrictions on China's garment exports by end of this year is leading many buyers to switch over to China and Vietnam.
A report published in a national daily this week suggested that due to heightened competition from China, sustaining the current export growth will be an uphill task for Bangladesh in the coming years. Overseas buyers generally come to Bangladesh due to availability of cheap labour force. On the contrary, everything else in garment production here needs to be imported. Country's lead-time is also long. Buyers want shipment in 20 days, but it is not possible to ship, from here, the consignments before 60 days, earlier which was 120 days.
However, Bangladesh's garment sector earned a place on the global export market map as a strong and matured industry as its apparels are known for their quality and price competitiveness. As such, any wrong strategy of the government may trigger setback in country's international textile market. The country's apparels are now being exported to 90 different countries with the USA being its single largest buyer.
Although the EU is the largest export market, Bangladesh is now in the process of expanding its market to countries like Australia, Canada, Japan, Norway and New Zealand in order to avail itself of the duty-free market access and generalised systems of preference (GSP) benefits provided by these countries to the least developed countries (LDCs). Reports prepared recently by the United Nations Development Programme (UNDP) and the International Monetary Fund (IMF) suggested that Bangladesh ran the risk of losing about one and a half million jobs, mostly women. They also pointed out that there was serious possibility that uneven competition from China would suffocate demand from Bangladesh.
There are reports that certain quarters are desperately trying to destroy the country's burgeoning garments industry. Allegations have it that a US labour rights group is engaged in instigating labour unrest in Bangladesh, taking advantage of the grievances of the workers of several sick garment units in the industrial belt. The rights group is reported to have been allegedly serving the interests of competitor countries.
Many exporters have reasons to believe in 'conspiracy theories' where the image of Bangladesh is being deliberately tarnished for some competitors' gains. Some leading media outlets in the UK are frequently reporting on Bangladeshi garment sector's non-compliance with international standards, by selectively exhibiting the sick industries in and outside Dhaka. In fact, more than 70 per cent of the factories are compliant, yet the media outlets are only showing the problem factories. And there is a British non-government organisation (NGO) -- War on Want -- is campaigning that Bangladesh pays an exploitative hourly wage of only 5.0 cents to its workers, in contrast to the 5.0 pounds in the UK, encouraging Britons not to buy clothes from stores that sell Bangladeshi made garments.
In order to address such negative campaigns against the country's thriving garments industry, the government should back the BGMEA initiative to persuade the US Congress to accord duty-free access to Bangladeshi products (as has been provided to 33 other sub-Saharan and Caribbean LDCs). Intense lobbying needs to be undertaken to point out that the USA cannot discriminate between LDCs. Bangladesh agreed with the US demand to allow trade union activities in the EPZs. Now it is the turn of the US to give Bangladeshi entrepreneurs a helping hand in the post-MFA era.
The lead-time on delivery issues matters most in the RMG export trade. In the beginning, the lead-time was 120-150 days but now in 2007, this has been reduced to 40 to 60 days, thanks to the timely intervention of the joint forces. China requires only 30 days due to their textile and other backward linkage facilities as well as export-friendly policy. There is a need to set up a central bonded warehouse for woven and grey fabrics in order to help the manufacturers collect the fabrics within seven days from the issuance of LCs and thus reduce lead-time.
The standard of customs service has improved a lot; still there is a scope for its further development up to the international level. Responding to the demand of the time, the customs service to the RMG owners should be relaxed and related officials must do their job with honestly and sincerity. In order to expand the market share and survive in the upcoming free global competition in the international market, product diversification appears to be an indispensable strategy. The more stretched the product lines and ranges, the better is the competitive strength.
Meanwhile, countries like Vietnam, China, Cambodia and Sri Lanka are offering high incentives to investors and the investors are drawing in an ever-increasing number of buyers. But in Bangladesh, if anybody wants to start a business, he needs permissions from 30 different agencies and such permissions do often entail informal costs. The interest rate on capital investment is also as high as 16 per cent, making the products non-competitive. The situation puts the burden of cost cutting in production on the workers.
What the government should do is to make the required permission to be reduced to just one, cutting down the 'hidden' cost of doing business by at least 2.0 per cent. If the government and the BGMEA take good care of this sector and implement the suggested measures for the purpose, experts expect the country will be able to attain the status of a major exporter to the extent of $ 25 billion a year in the next 20 years.